IN THE NATIONAL COMPANY LAW TRIBUNAL, DIVISION BENCH - I, CHENNAI

IBA/1045/2019 and IBA/1169/2019 filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 r/w Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016

In the matter of M/s. Easun Reyrolle Limited

IBA/1045/2019

Canara Bank, Having its Head Office at No. 112,

J.C.Road,

Bengaluru, Karnataka-560 002.

Having its Hosur Main Branch at

M.M.Reddy Complex,

Old Bangalore Road,

Hosur - 635 109.

... Financial Creditor -Vs-

M/s. Easun Reyrolle Limited,

“Temple Tower”, 6th Floor,

No.672, (Old No.476), Anna Salai,

Nandanam, Chennai - 600 035 ... Corporate Debtor

IBA/1169/2019

State Bank of India, Stressed Assets Management Branch,

Rep. by Assistant General Manager,

Montieth Road,

Egmore, Chennai. ... Financial Creditor

-Vs-

M/s. Easun Reyrolle Limited,

“Temple Tower”, VI Floor, 476, Anna

Salai, Nandanam, Chennai - 600 035

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Also at

‘A’ Block Pasupathinath,

26, Desika Road, Mylapore,

Chennai - 600 004

... Corporate Debtor

CORAM :

R. VARADHARAJAN, MEMBER (JUDICIAL) ANIL KUMAR B, MEMBER (TECHNICAL)

In IBA/1045/2019

For Financial Creditor : T.Rauichandran, Advocate For

Corporate Debtor : T.K.Bhaskar, Advocate

In IBA/1169/2019

For Financial Creditor : K.Chandrasekaran, Advocate For

Corporate Debtor . T.K.Bhaskar, Axdvccatc

COMMON ORDER

Per: R. VARADHARAJAN, MEMBER (JUDICIAL)

Order Pronounced on 2020

1. These Applications have been filed by the Financial

Creditors invoking the provisions of Section 7 of the

Insolvency and Bankruptcy Code, 2016 (“I&B

Code-2016”) r/w Rule 4 of the Insolvency and

Bankruptcy (Application to Adjudicating Authority)

Rules, 2016 (hereinafter referred to as “AAA Rules”)

against M/s. Easun Reyrolle Limited (hereinafter referred

to as ‘Corporate Debtor’).

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The prayers made in the Applications are to admit

the Applications, to initiate the Corporate Insolvency

Resolution Process (CIRP) against the Corporate Debtor,

declare moratorium and appoint Interim Resolution

Professional (IRP).

Since both the Applications filed by the Financial

Creditors are in relation to the same Corporate Debtor,

both are taken up together to be disposed of by way of a

common order, as the proceedings under IBC, 2016 in

relation to CIRP being a proceeding in rem.

2. Heard the Learned Counsel for the Financial

Creditors and the Learned Counsel for the Corporate

Debtor and perused the pleadings including the

documents placed on the case file.

3. The brief facts of the case of the Financial Creditor

namely Canara Bank in IBA/1045/IB/2019 are as

follows:

i. The outstanding amounts claimed by the Financial

Creditor in IBA/1045/IB/2019 against the

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Corporate Debtor is Rs.59,31,10,589.42p with interest

till 18.07.2019. The amount claimed to be in default is

set out in a tabular column at page 26 of the typed set

filed with the Application, a perusal of which shows that

the default is said to have arisen in relation to the

overdraft cash credit facility granted by the Financial

Creditor to the Corporate Debtor.

ii. The Financial Creditor states that the Corporate

Debtor is engaged in the business of providing complete

range of Power Management Products, Systems,

Solutions and Services spread across generation,

transmission, distribution and industrial application.

iii. The Corporate Debtor approached the Financial

Creditor with the request to sanction an Over Draft Cash

Credit facility of Rs. 30.00 Crores to mete out their

working capital requirements. Considering the request

made by the Corporate Debtor, the Financial Creditor

sanctioned the Over Draft Cash facility of Rs.30.00

Crores to the Corporate Debtor vide Sanction

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Letter dated 08.03.2013. Copy of Sanction Letter dated

08.03.2013 is placed at page 32 to 41 of the typed set

filed with the Application. The Financial Creditor has also

placed on record the copy of the Board Resolution dated

17.04.2013 at pages 42 and 43 of the typed set filed with

the Application, authorising the Corporate Debtor to avail

the Fund Based facility of Rs.30 Crores in the form of

various credit facilities from the Financial Creditor.

iv. In order to secure the above facility, the Corporate

Debtor executed (i) the Demand Promissory Note for a

sum of Rs.30 Crores and (ii) Common Hypothecation

Agreement in favour of the Financial Creditor, on

19.06.2013 as security for due repayment of the loan.

Copies of the documents dated 19.06.2013 are placed at

pages 44 to 77 of the typed set filed with the Application.

v. In addition, the Corporate Debtor executed the

Memorandum Confirming the Extension of Equitable

Mortgage in favour of the Financial Creditor on

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16.09.2013, copy of which is placed at pages 78 to 91 of

the typed set filed with the Application. Besides above,

the Corporate Debtor deposited the title deeds with the

Financial Creditor in respect of the property mentioned

therein by executing memorandum relating to Deposit of

Title Deeds, copy of the same is placed at pages 92 to 100

of the typed set filed with the Application.

vi. The Corporate Debtor vide letter dated 17.02.2014

has requested the Financial Creditor to renew the Cash

Credit Facility, copy of which is placed at page 101 of the

typed set filed with the Application. The said request was

considered and the Cash Credit Facility was renewed by

the Financial Creditor vide Sanction Letter dated

24.09.2014, copy of which is placed at pages 102 to 112

of the typed set filed with the Application.

vii The Corporate Debtor had executed various

documents in favour of the Financial Creditor in view of

the renewal of the facility. Besides that, the

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Corporate Debtor executed Acknowledgement of Debt

and Security dated 15.10.2014 in favour of the Financial

Creditor, copy of which is placed at page 113 of the typed

set filed with the Application.

viii. The Corporate Debtor after availing the loan and

executing the loan documents in favour of the Financial

Creditor had become irregular in repayment of both the

principal and interest amounts due to the Financial

Creditor. On account of the continued default committed

by the Corporate Debtor, the Financial Creditor vide its

communication dated 28.10.2015, requested the

Corporate Debtor to clear the entire overdue immediately,

copy of which is placed at page 114 of the typed set filed

with the Application. Since no amount was forthcoming,

the Financial Creditor issued a recall notice dated

31.10.2015 to clear the entire liability, copy of which is

placed at pages 115 and 116 of the typed set filed with the

Application.

ix. On 02.03.2017, the Corporate Debtor executed

Acknowledgement of Debt and Security in favour of the

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Financial Creditor acknowledging the outstanding

amount due to the Financial Creditor, copy of which is

placed at page 117 of the typed set filed with the

Application.

x. The Corporate Debtor has failed to pay the amounts

legitimately due to the Financial Creditor even after

repeated requests made by the Financial Creditor.

Therefore, the account of the Corporate Debtor was

classified as Non Performing Asset (NPA) on 29.09.2017.

Thereafter, the Financial Creditor had issued a Legal

Notice dated 07.09.2018 calling upon the Corporate

Debtor to discharge their entire liability under various

agreements executed by them in favour of the Financial

Creditor as against the Cash Credit facility. Copy of Legal

Notice is placed at pages 118 to 121 of the typed set filed

with the Application.

xi In addition, the Financial Creditor has placed the

CRILC Report dated 16.07.2019 issued by the RBI at

pages 122 to 124 of the typed set filed with the

Application. Besides above, the Financial Creditor has

filed the statement of account for the period from

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01.01.2012 to 15.07.2019 at pages 125 to 445 of the

typed set filed with the Application and the Certificate

issued under the Bankers’ Books Evidence Act, 1981 is

placed at page 445 of the typed set filed with the

Application.

4. The brief facts of the case of the Financial Creditor

namely State Bank of India in CP/1169/2019 are as

follows:

i. The outstanding amounts claimed by the Financial

Creditor namely State Bank of India in

IBA/1169/IB/2019 against the Corporate Debtor is to

the tune of Rs.204,89,03,878.20p as on 31.08.2019 with

further interest and other charges, less recoveries if any.

ii. The Financial Creditor states that the Corporate

Debtor namely M/s Easun Reyrolle Limited approached

the Financial Creditor, Overseas Branch, Bangalore, for

credit facilities for their business of manufacturing

Relays and control panels. At the

(V 9 of 33

request of the Corporate Debtor, Financial Creditor

sanctioned the Fund Based Cash Credit Limit of Rs.

13.25 Crores and Non-Fund Based Limits of Rs. 12.25

Crores, totalling to Rs.25.50 Crores to the Corporate

Debtor for their business. Copy of Sanction Letter dated

01.01.2000 is placed at pages 21 to 25 of the typed set

filed with the Application.

iii. The Financial Creditor has placed on record the

Resolution dated 21.01.2000 passed by Board of

Directors of the Corporate Debtor on accepting the terms

and conditions of the sanction letter. Copy of Board

Resolution dated 21.01.2000 is placed at page 26 to 31 of

the typed set filed with the Application.

iv. After availing the loan, the Corporate Debtor

executed the following documents in favour of the

Financial Creditor on 19.02.2000 as security for due

repayment:-

(a) Agreement of Loan for Overall Limit,

(b) Agreement of Hypothecation of Goods

and Assets,

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»

(c) Deed of Guarantee for overall limit,

(d) Letter Regarding the Grant of Individual

Limits within the Overall Limit

v. The Financial Creditor from time to time

renewed/revised Fund Based Working Capital, Non-

Fund Based Limits to the Corporate Debtor vide Sanction

Letters dated 13.11.2001, 29.01.2003,

19.02.2004 and 25.08.2004 for their business. Copies of

Sanction Letters are placed at pages 128 to 146 of the

typed set filed with the Application.

vi. In order to secure the said renewed/revised

sanctions, the Corporate Debtor executed the following

documents on 30.08.2004 in favour of the Financial

Creditor as security for due repayment:-

a. Letter regarding the grant of individual limits

within the overall limit and

b. Revival letter

vii. Again, the Financial Creditor vide Sanction Letter

dated 06.12.2004, copy of which is placed at

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pages No. 158 to 163 of the typed set filed with the

Application, sanctioned/renewed the Fund Based

Working Capital of Rs. 13.50 Crores and Non-Fund

Based limit of Rs. 12.75 Crores, totalling to Rs.26.25

Crores to the Corporate Debtor for their business. In this

connection, the Resolution dated 10.12.2004 passed by

the Board of Directors of the Corporate Debtor is placed

at page 164 of the typed set filed with the Application.

viii. For the renewed facilities sanctioned by the

Financial Creditor, the Corporate Debtor executed the

following documents in favour of the Financial Creditor,

as security for due repayment, on

10.12.2004:-

a. Supplemental Agreement of loan for increase

in the overall Limit,

b. Supplemental Agreement of Hypothecation of

goods and assets for increase in overall limit,

c. Supplemental Deed of Guarantee for increase

in the overall Limit and

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d. Letter regarding the grant of individual limits

within the overall limit.

ix. Likewise, the Financial Creditor now and then

accorded the sanction/renewal of Fund Based Working

Capital and Non Fund Based Limits to the Corporate

Debtor on 21.10.2005, 18.01.2006 18.10.2006,

23.06.2007, 04.11.2008, 05.02.2009, 04.11.2009,

18.11.2010, 12.04.2013, 08.03.2014 and 28.2.2015 to

the Corporate Debtor for their business.

x. Besides executing the security documents such as

Supplemental Agreement of Loan for increase in Overall

Limit and Supplemental Agreement of Hypothecation of

Goods and Assets for increase in Overall Limit from time

to time in favour of the Financial Creditor, the Corporate

Debtor has created equitable mortgage by deposit of title

deeds in respect of various properties situated at Hosur

on 14.11.2006 and also executed a Memorandum

relating to Deposit of Title Deeds on 04.12.2008 and

22.4.2009 in favour of the Financial Creditor. Similarly,

the charges over

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the property in respect of the Corporate Debtor have also

been registered with Registrar of Companies.

xi. In addition, the Corporate Debtor has

acknowledged the liability in writing by executing Revival

Letters in favour of the Financial Creditor now and then

on 30.08.2004, 29.10.2005, 27.02.2006, 22.04.2009,

11.11.2009, 14.03.2012,04.03.2015 and 10.02.2018,

xii. After availing the above facilities and executing the

security documents in favour of the Financial Creditor,

Corporate Debtor failed to regularize the account. Hence,

the Financial Creditor issued Legal Notice dated

19.06.2018 calling upon the Corporate Debtor to repay

the outstanding amount due to the Corporate Debtor,

copy of which is placed at pages 716 to 718 of the typed

set filed with the Application to which the Corporate

Debtor has not sent any reply.

xiii. Despite several reminders, the Corporate Debtor

failed to repay the liability owed by it to the Financial

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Creditor. Therefore, the Financial Creditor was

constrained to classify the account of the Corporate

Debtor as Non-Performing Asset (NPA) on 28.10.2015. At

this juncture, the Financial Creditor states that after the

classification of the loan account of the Corporate Debtor

as NPA, the Corporate Debtor executed two Revival

Letters dated 10.02.2018, copies of which are placed at

pages 705 to 708 of the typed set filed with the

Application, acknowledging me outstanding balance

amount due to the Financial Creditor.

xiv. Further, the statement of accounts and the

Certificate issued under the Banker's Books Evidence

Act, 1876 are placed pages 748 to 751 of the typed set

filed with the Application. It is also stated that the OA No.

426 of 2019 filed by the Financial Creditor before the

DRT-2, Chennai is pending.

5. Counter Affidavit filed by the Corporate Debtor

i. The Chief Financial Officer of the Corporate Debtor

filed Counter Affidavit in IBA/1045/2019 on 19.11.2019

wherein it is stated that the present

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Application has been preferred by the Financial Creditor

seeking to initiate CIR Process against the Corporate

Debtor in respect of a claim of Rs. 59,31,10,589.42p in

relation to an Over Draft Cash Credit facility availed by

the Corporate Debtor on 08.03.2013 to an extent of Rs.

30 Crores, which was subsequently renewed on

15/10/2014.

ii. It is further stated that the Corporate Debtor is an

entity incorporated on 29.08.1974 under the name and

style of Easun Reyrolle Relays and Devices Limited. The

name of the Company was subsequently changed to its

current name 'Easun Reyrolle Limited’, and a fresh

certificate of incorporation consequent to change of name

was issued on 11.11.1997. The Corporate Debtor is a

Public Limited Company with around 13,400 public

shareholders and the shares of the Corporate Debtor are

listed on National Stock Exchange and Bombay Stock

Exchange.

iii. The Corporate Debtor is engaged in the business of

electrical power management, morefully concerning

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the manufacturing, importing, exporting and dealing with

all kind of relays, protective devices, test kits and

accessories thereof used in connection with power and

control systems.

iv. The Company has its manufacturing units located

in SIPCOT Industrial Estate, Hosur, Krishnagiri District,

Tamilnadu wherein the assembly, testing and packing

unit has been set up for the products/ systems business

namely Electrical Relays (Electro- Mechanical and

Digital- Communicable / non- communicable) and

control panel systems, and in Harohalli, Ramnagara

District, Karnataka, the manufacturing unit at Harohalli

has been set up primarily for the Enclosures that can be

used for the ERL products / systems such as numeric

relays, control panels, ring main units, etc.

v. It is averred that taking into account the Company’s

viability in the industry, a need for restructuring was felt

in the light of the changing market scenario. In that

connection, a number of

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recommendations were made to effectively restructure

the Company and several projections were made in

relation to the Company of its future capabilities.

vi. The Corporate Debtor, though has been a pioneer in

the industry and the relevant product market it deals in,

there were certain setbacks which brought down the

performance of the Company. The company had to face

loss for the past few years which is mainly on account of

its working capital that had been affected. Further, the

trends of the industry shifted to offering turn key projects

leaving the independent equipment manufacturing

entities to a back stage. As a result, the Company’s main

focus has shifted to undertaking turn key projects. Some

of the projects were delayed for over a period of five years

and some other had to come to a standstill because of

certain extraneous factors like security issues, issues

with right of way clearances for lines, etc. As a result of

the same, the sub-contractors also suffered substantially

leading to minimal bids in the subsequent projects. In

fact, as on date a sum of Rs. 103,88,77,875/- is due to

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be received from various state utilities like Andhra

Pradesh Power Utility Corporation, Assam Power

Distribution Company, Bangalore Electricity Supply

Corporation Limited, Eastern Power Distribution Limited,

Indian Oil Corporation Limited, Karnataka Power

Transmission Corporation Limited, Power Grid

Corporation of India, Tamil Nadu Electricity Generation

Corporation, etc. This situation further led to a cash

crunch and liquidity issues, as the receivables could not

be materialised.

vii. Though the Corporate Debtor has suffered certain

setbacks in the past, it has always displayed its capacity

to turnaround the set back and achieved a profitable

position. In fact, in 1987, the Company was declared sick

by the Board for Industrial and Financial Reconstruction

(‘BIFR’) and a scheme of rehabilitation was sanctioned in

April, 1990. In 1990, the company renewed its license

agreement with its collaborators turned around and

posted a net profit of Rs. 70.36 Lakh in 1990-91. This

improved to Rs. 182.05 Lakh in 1993-94. The Central

Electricity Generating Board has

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also acknowledged the Corporate Debtor’s equity partner

Reyrolle’s adherence to the highest engineering

standards.

viii. It is further averred that a substantial worth of

inventories of the Corporate Debtor were in transit lying

at customs bonded warehouse to the extent of Rs. 517.65

Lakhs. As mentioned in the disclosure in the auditor’s

report for the year ended 31st March, 2018, stocks to the

extent of Rs. 314.78 Lakhs are pending clearance from

the customs warehouse for more than 3 years. Thus,

these factors eventually crippled the working and thriving

of the business of the Corporate Debtor.

ix. Despite the same, the Corporate Debtor has certain

key potentials which are distinct and highly imperative in

the electrical power market. The Corporate Debtor is

known for its distinct automation of the electrical grids.

The Company has developed multiple products to suit the

transmission and distribution segments, both in India

and abroad and

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has substantially brought down the cost of the products,

to achieve a higher EBITDA. Therefore, the Corporate

Debtor has been taking substantial steps to improve its

position over time.

x. The Corporate Debtor also has a significant

projected turnover as observed in the viability report. In

fact, the following table depicts a substantial turnover

achieved by the Corporate Debtor from the sale of its

products for a period of five years from 2012 till 2016:

DESCRIPTION 12 months

ending March

31, 2012

(In Lakhs)

12 months

ending March

31, 2013 (In Lakhs)

12 months

ending March

31, 2014

(In Lakhs)

12 months ending March 31,2015 (In

Lakhs)

12 months

ending March

31, 2016 (In Lakhs)

Sale of Products 28, 448.53 22,780.47 18,715.34 6265.30 3,456.31

Relays and Control

Panels

16,222.36 10,971.08 6562.69 3392.51 2913.19

Substation

Automation/

Meters

2,606.64 143.08 50.87

RMU — — — 461.86 20.76

Switchgear 3044.01 2250.18 1079.68 41.17 102.51

Projects 1291.27 8093.77 10,009.95 2,081.12

278.11

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xi. In addition, the Corporate Debtor has been

receiving and executing various orders from time to time.

The Corporate Debtor has current orders worth Rs.34.29

Crores in relation to its protection system business and

orders worth Rs.5.93 Crores in relation to protection

products business, in addition to orders worth Rs.1.75

Crores in the switch gear business. As estimated and

recorded in the viability report of the Corporate Debtor,

the Company has a projected total possible market

opportunity of Rs.242 Crores for the year 2020-21 with

up to Rs. 337.9 Crores in the year 2026-27.

xii. During 1997-98, the Company has received ISO-

9002 accreditation from Electricity Association Quality

Assurance Limited, UK for the quality systems in Hosur

and Bangalore factories. The Corporate Debtor has been

actively working in relation to revival of the Company.

Recently in April 2017, at the behest of one of the bankers

of the Corporate Debtor namely State Bank of India, a

forensic review was conducted in relation to the

Corporate Debtor. It was concluded that

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there is no diversion of funds, or any malicious intent and

also highlights certain reasons behind the set back faced

by the Company.

xiii. It is averred in the Counter Affidavit that the

Corporate Debtor has also been taking substantial efforts

to explore venues to settle and service the debt

obligations to various bankers. Further, the Corporate

Debtor has been in existence for over forty five years, with

substantial public shareholding. The Corporate Debtor

has a substantial potential of revival, and in relation to

the same, the viability report specifically recommends a

restructuring framework with a proposed repayment

schedule in relation to various facilities obtained by the

Corporate Debtor, with serviceability of the facilities

being sourced by a combination of promoter’s

contribution and revenue inflows from business

operations, with adequate monitoring systems in place

for the restructuring scheme. The projections in relation

to the profits sought to be achieved by the company are

set out herein below, which are adequately sufficient to

meet

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the repayment obligations of the Company in the

forthcoming years:

Description 2020 2021 2022 2023 2024 2025

2026 2027

Gross Profit 68.45 83.04 81.19 87.39 95.19 100.02 100.02 99.99

Selling and

administrati ve

expenses

28.96 30.54 19.49 21.41 23.52 23.52 23.52 23.52

Gross profit

before

interest

39.50 52.50 61.71 65.98 71.66 76.50 76.50 76.48

Retained

Profit

10.71 51.41 28.91 33.96 40.59 46.93 49.75 45.81

xiv. It is stated that the Company is in the process of

locating investors / other financial sponsors to take over

some of the liabilities owed to the banks and the

Corporate Debtor is in the stage of final discussions, in

relation to the same and further that initiating CIR

Process against the Corporate Debtor at this point would

substantially affect the ability of the Company to

effectively continue as a ‘going concern’. The Corporate

Debtor is also examining methods to recover various dues

to the extent of 103.88 Crores, recoverable from various

state utilities, so that the same can be utilized for settling

the creditors of the Corporate Debtor.

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xv. It is pleaded that the Corporate Debtor is not a fit

Company to be subject to CIR Process, and the Company

ought to be allowed to function in its current framework,

especially in the light of the fact that various industries

are dependent on the Corporate Debtor, the workforce,

both in direct and indirect employment and the

substantial public shareholding involved in the Company

and especially on account of the fact that the Corporate

Debtor is one of the largest suppliers for various state

electricity projects. Therefore, if the company is subject to

CIR Process, its growth potential and the interest of the

stakeholders will be substantially crippled and

prejudiced. Hence, the Corporate Debtor has prayed to

dismiss the Application.

6. We have carefully considered the rival

submissions as well as the pleadings and the documents

as filed by the Counsel for the parties before this

Tribunal. The Counter Affidavits filed by the Corporate

Debtor in both the matters reveal that

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though the Corporate Debtor has filed separate Counter

Affidavits on different dates, the contentions raised

therein by the Corporate Debtor are the one and the

same. A perusal of the Counter Affidavit shows that the

Corporate Debtor has nowhere denied the availing of the

Over Draft Cash Credit facility from Canara Bank and

Fund Based and Non-Fund Based Credit facility from

State Bank of India and the subsequent renewal thereto

by them on various dates.

7. The Learned Counsel for the Financial Creditor has

drawn the attention of this Tribunal to the submissions

made by the Learned Counsel for the Corporate Debtor

during the course of arguments in relation to the offer

made by the Corporate Debtor to settle the outstanding

amounts due to the Financial Creditor under OTS, and

submits that in itself amounts to the admission of

liability by the Corporate Debtor.

8. Be that as it may; it is pointed out by the Learned

Counsel for the Financial Creditor that the Hon hie

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NCLAT in the matter of Dr. Esther Malini Victor -Vs-

Oriental Bank of Commerce & Ors. in Company Appeal

(AT) (Insolvency) No.822 of 2019, wherein a similar set of

issue came up for consideration before the HonTDle

NCLAT and the HonT>le NCLAT, after examining the

same, it was held that if the debt and default is proved, the

Adjudicating Authority is bound to admit the Section 7

Application under I&B Code, 2016 and upheld the Order

passed by NCLT, Chennai.

9. Moreover, as consistently held by HonT)le Supreme

Court both in Innoventive Industries Ltd. - Vs- ICICI

Bank and another, (2018) 1 SCC 407 as well as Mobilox

Innovations Pvt. Ltd.. -Vs- Kirusa Software Pvt. Ltd.

(2018) 1 SCC 353, after going through the Scheme of I&B

Code, 2016 in depth in relation to an Application under

Section 7 filed by a Financial Creditor where there is an

existence of a 'financial debt’ and its ‘default’ in excess of

Rs. 1,00,000/-, this Tribunal is bound to admit the

Application and as a consequence trigger the CIR Process.

The plea of the Corporate Debtor that the

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Company is a solvent and ‘going concern’, cannot be

made a ground for delaying the initiation of CIR Process

or to keep in abeyance the instant Application as sought

for as this Tribunal is required in case of a ‘financial debt’

which is due and in the event of ‘default’ as defined under

I&B Code, 2016, is perforce required to admit the

Application and the parties including the Corporate

Debtor can have recourse during CIR Process to submit a

Plan for restructuring if otherwise not disqualified. It is

evident from the documents filed by the individual

Financial Creditor in their respective petitions the debt is

also not time barred in view of acknowledgments given by

the Corporate Debtor to each of the Petitioner banks as

contemplated under Section 18 of the Limitation Act,

1963. In any case, there is no denial of liability owed to

the individual Financial Creditor by the Corporate

Debtor.

10. Thus, taking into consideration the facts and

circumstances of the case as well as the position of law,

we are of the view that the Applications, as filed by

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the Financial Creditors are required to be admitted

under Section 7 (5) of the I&B Code, 2016.

11. Both the Financial Creditors have proposed the

names of Interim Resolution Professional (IRP) and written

communications in the format prescribed under Form 2 of

the Insolvency and Bankruptcy Board of India (Application

to Adjudicating Authority) Rules, 2016 have been filed by

the proposed IRPs. However, in relation to the

appointment of IRP, upon perusal of Part - IV of the

Application, it may be seen that the debt due to the State

Bank of India, prima facie appears substantially to be

more than that of the Canara Bank and in such a

circumstance, it is just and necessary for this Tribunal to

appoint the IRP as suggested by the State Bank of India in

IBA/1169 2019. As a result thereof, Mr. B.

PARAMESHWARA- UDPA, whose Registration No. IBBI /

IPA-002 / IP- N00480 / 2017-2018

/11445, and Email:

beepeeyou@gmail.com, Mobile No. +91-9483712078, is

appointed as IRP. The IRP appointed shall take in this

regard such other and further steps as are

required under the Statute, more specifically in terms of

Sections 15, 17, 18 of the I&B Code, 2016 and file his

report within 20 days before this Bench. The powers of

the Board of Directors of the Corporate Debtor shall

stand superseded as a consequence of the initiation of

the CIR Process in relation to the Corporate Debtor in

terms of the provisions of I&B Code, 2016.

12. As a consequence of the Applications being

admitted in terms of Section 7 of the I&B Code, 2016,

moratorium as envisaged under provisions of Section

14(1) and as extracted hereunder shall follow in relation

to the Corporate Debtor;

(a) the institution of suits or continuation of pending

suits or proceedings against the Corporate

Debtor including execution of any judgment,

decree or order in any court of law, tribunal,

arbitration panel or other authority;

(b) transferring, encumbering, alienating or

disposing of by the Corporate Debtor any of its

assets or any legal right or beneficial interest

therein;

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(c) any action to foreclose, recover or enforce any

security interest created by the Corporate

Debtor in respect of its property including any

action under the Securitization and

Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002;

(d) the recovery of any property by an owner or

lessor where such property is occupied by or

in the possession of the Corporate Debtor.”

13. However during the pendency of moratorium period

in terms of Section 14(2) and 14(3) as extracted

hereunder;

(2) The supply of essential goods or services to the

Corporate Debtor as may be specified shall not

be terminated or suspended or interrupted

during moratorium period.

(2A) Where the interim resolution professional or

resolution professional, as the case may be,

considers the supply of goods or services

critical to protect and preserve the value of the

corporate debtor and manage the operations

of such corporate debtor as a going concern,

then the supply of such

goods or services shall not be terminated,

suspended or interrupted during the period of

moratorium, except where such corporate

debtor has not paid dues arising from such

supply during the moratorium period or in

such circumstances as may be specified

(3) The provisions of sub - section (1) shall not

apply to such transactions, agreements or

other arrangements as may be notified by the

Central Government in consultation with

any financial sector regulator or any other

authority.”

14. The duration of period of moratorium shall be as

provided in Section 14(4) of the Code which is reproduced

below for ready reference;

(4) The order of moratorium shall have effect from

the date of such order till the completion of the

Corporate Insolvency Resolution Process

Provided that where at any time during the

Corporate Insolvency Resolution Process

period, if the Adjudicating Authority approves

the Resolution Plan under sub -

32 of 33

section (1) of Section 31 or passes an order for

liquidation of Corporate Debtor under Section

33, the moratorium shall cease to have effect

from the date of such approval or liquidation

order, as the case may be.”

15. Based on the above terms, the Applications stand

admitted in terms of Section 7 of the I&B Code, 2016

and the Moratorium shall come into effect as of this

date. A copy of the Order shall be communicated to the

Financial Creditors as well as to the Corporate Debtor

above named by the Registry. In addition, a copy of the

Order shall also be forwarded to IBBI for its records.

Further, the IRP above named be also furnished with

copy of this order forthwith by the Registry, who will

also communicate the initiation of CIR Process in

relation to the Corporate Debtor to the Registrar of

Companies concerned.

-SD- -SD-

(ANIL KUMAR B) (R.VARADHARAJAN) 1 MEMBER (TECHNICAL) MEMBER (JUDICIAL) VN

I ___________ , ____________ AL)

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